Australia joins global rates easing party

Tuesday, May 03, 2016 - 01:41

Australia's central bank has cut interest rates to an all-time low of 1.75 percent as it seeks to restrain a rising currency and stave off the creeping curse of deflation. As David Pollard reports, it comes a day after ECB President Mario Draghi defended his polcy of ultra-low rates in the face of German criticsim.

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This was meant to be the headline act.
A pre-election budget to showcase the Australian goverment's economic credentials in the run-up to an election.
That is, until the RBA stole the show - by cutting rates to 1.75% - an all-time low.
SOUNDBITE (English) IG SENIOR ANALYST, CHRIS BEAUCHAMP, SAYING:
"It marks a remarkable capitulation from a central bank that was remarkably steady in its outlook. The fact that it held at two per cent for so long sent this message that Australia was a haven of sanity in a difficult world."
But with inflation slowing and global telltales still blinking red, the RBA move wasn't totally unexpected.
New data shows another contraction in Chinese factory output, UK manufacturing unexpectedly weaker - and EU growth forecasts revised down again.
That putting more pressure on the ECB to defend a policy of negative interest rates some see hindering, not helping the economy.
(SOUNDBITE) (English) ECB PRESIDENT MARIO DRAGHI, SAYING:
"They are not the problem. They are the symptom of an underlying problem."
Shinzo Abe's stimulus programmes also in the frame as the Japanese prime minister tours Europe.
Markets were shocked by a lurch into negative rates in January.
But then equally unnerved when the BoJ held back, next time around.
SOUNDBITE (English) IG SENIOR ANALYST, CHRIS BEAUCHAMP, SAYING:
"The Bank of Japan's decision not to move last week shows that investors do still have faith in their ability ... Even at this stage of the post-financial crash world, we are still very much prisoners of what central banks do."
And likely to remain so - eight central banks globally embarking on entirely new stimulus cycles this year alone.

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